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Ares Capital Q3 Earnings Miss as Expenses Increase Y/Y
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Ares Capital Corporation’s (ARCC - Free Report) third-quarter 2024 core earnings of 58 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line reflects a decline of 1.7% from the prior-year quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The results were primarily affected by an increase in expenses. Nonetheless, an improvement in the total investment income and the company’s robust portfolio activities supported the results to some extent.
GAAP net income was $394 million or 62 cents per share, down from $500 million or 89 cents per share in the prior-year quarter.
Ares Capital’s Total Investment Income Improves, Expenses Rise
Total investment income was $775 million, up 18.3% year over year. The rise was largely driven by an increase in interest income from investments, capital structuring service fees and dividend income. The top line surpassed the Zacks Consensus Estimate of $767 million.
Total quarterly expenses were $402 million, up 10.7% year over year. The increase was due to a rise in all the components except capital gains incentive fee charges and administrative fees.
Portfolio Activities Robust for ARCC
In the third quarter, the company made gross commitments worth $3.92 billion to new and existing portfolio companies. This compares with $1.6 billion of gross commitments in the prior-year quarter.
Further, the company exited $2.6 billion of commitments compared with $1.28 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $25.9 billion as of Sept. 30, 2024.
The fair value of accruing debt and other income-producing securities was $23.3 billion.
Ares Capital’s Balance Sheet Strong
As of Sept. 30, 2024, the company’s cash and cash equivalents totaled $486 million, down from $535 million as of Dec. 31, 2023.
Ares Capital had $4.5 billion available for additional borrowings under the existing credit facilities as of Sept. 30, 2024. Total outstanding debt was $13.5 billion.
As of Sept. 30, 2024, total assets were $27.1 billion and stockholders’ equity was $12.8 billion.
Net asset value was $19.77 per share, up from $19.24 as of Dec. 31, 2023.
Our Take on ARCC
Driven by a rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies might lead to a rise in costs in the near term, which is expected to hurt the bottom line. Further, regulatory constraints pose another major headwind.
Ares Capital Corporation Price, Consensus and EPS Surprise
UBS Group AG (UBS - Free Report) reported third-quarter 2024 net profit attributable to shareholders of $1.42 billion against a net loss of $715 million in the prior-year quarter.
UBS’ results were driven by the strong performances of the Global Wealth Management, Asset Management and Investment Bank divisions. The decrease in operating expenses was another positive. However, an increase in credit loss expenses was a headwind.
Artisan Partners Asset Management Inc. (APAM - Free Report) reported third-quarter 2024 adjusted net income per share of 92 cents, which beat the Zacks Consensus Estimate of 91 cents. The bottom line increased 22.7% from the prior-year quarter.
Results benefited from Global Funds and Separate account growth. An increased asset under management balance resulted in top-line growth. The balance sheet position also improved in the reported quarter. However, rising operating expenses acted as a headwind for APAM.
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Ares Capital Q3 Earnings Miss as Expenses Increase Y/Y
Ares Capital Corporation’s (ARCC - Free Report) third-quarter 2024 core earnings of 58 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line reflects a decline of 1.7% from the prior-year quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The results were primarily affected by an increase in expenses. Nonetheless, an improvement in the total investment income and the company’s robust portfolio activities supported the results to some extent.
GAAP net income was $394 million or 62 cents per share, down from $500 million or 89 cents per share in the prior-year quarter.
Ares Capital’s Total Investment Income Improves, Expenses Rise
Total investment income was $775 million, up 18.3% year over year. The rise was largely driven by an increase in interest income from investments, capital structuring service fees and dividend income. The top line surpassed the Zacks Consensus Estimate of $767 million.
Total quarterly expenses were $402 million, up 10.7% year over year. The increase was due to a rise in all the components except capital gains incentive fee charges and administrative fees.
Portfolio Activities Robust for ARCC
In the third quarter, the company made gross commitments worth $3.92 billion to new and existing portfolio companies. This compares with $1.6 billion of gross commitments in the prior-year quarter.
Further, the company exited $2.6 billion of commitments compared with $1.28 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $25.9 billion as of Sept. 30, 2024.
The fair value of accruing debt and other income-producing securities was $23.3 billion.
Ares Capital’s Balance Sheet Strong
As of Sept. 30, 2024, the company’s cash and cash equivalents totaled $486 million, down from $535 million as of Dec. 31, 2023.
Ares Capital had $4.5 billion available for additional borrowings under the existing credit facilities as of Sept. 30, 2024. Total outstanding debt was $13.5 billion.
As of Sept. 30, 2024, total assets were $27.1 billion and stockholders’ equity was $12.8 billion.
Net asset value was $19.77 per share, up from $19.24 as of Dec. 31, 2023.
Our Take on ARCC
Driven by a rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies might lead to a rise in costs in the near term, which is expected to hurt the bottom line. Further, regulatory constraints pose another major headwind.
Ares Capital Corporation Price, Consensus and EPS Surprise
Ares Capital Corporation price-consensus-eps-surprise-chart | Ares Capital Corporation Quote
Currently, ARCC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
UBS Group AG (UBS - Free Report) reported third-quarter 2024 net profit attributable to shareholders of $1.42 billion against a net loss of $715 million in the prior-year quarter.
UBS’ results were driven by the strong performances of the Global Wealth Management, Asset Management and Investment Bank divisions. The decrease in operating expenses was another positive. However, an increase in credit loss expenses was a headwind.
Artisan Partners Asset Management Inc. (APAM - Free Report) reported third-quarter 2024 adjusted net income per share of 92 cents, which beat the Zacks Consensus Estimate of 91 cents. The bottom line increased 22.7% from the prior-year quarter.
Results benefited from Global Funds and Separate account growth. An increased asset under management balance resulted in top-line growth. The balance sheet position also improved in the reported quarter. However, rising operating expenses acted as a headwind for APAM.